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Abdication and paralysis of management yet another legacy of State Capture crisis

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Dr Michael Gering is a strategy consultant and has consulted in a variety of industries both in South Africa and in Europe. He has a PhD in theoretical physics and an MBA from the Open Business School. Professor Mojalefa Ralekhetho is a graduate of Columbia University (Politics) and New School for Social Research (Economics). He is a management consultant and executive leadership coach. He has held executive and senior positions in universities (TUT, CUT) and government (DMRE, FSPG), and currently teaches a graduate course in economics at the Institute for Economic Research in Innovation at Tshwane University of Technology (TUT).

No one goes into business to get a clean audit. Rules and guidelines work well in organisations with a performance ethic and a delivery focus. When compliance becomes the primary focus, it often comes at the expense of results and service.

One of the most insidious effects of State Capture has been abdication by many managers in government organisations.

While at face value, the direct cost attributed to State Capture runs into hundreds of billions, it is nowhere near large enough to impact an annual economy of over R6-trillion.

In fact, it is the collateral damage of State Capture — the poor management, the low productivity and the wasteful practices — that together have caused the slow growth, high unemployment and increasing inequality that are characterising the Zuma-Ramaphosa years.

Read more in Daily Maverick: A library like no other: Zondo Commission records get a home

We have a saying in consulting that no one goes into business to get a clean audit. Rules and guidelines work well in organisations with a performance ethic and a delivery focus. When compliance becomes the primary focus, it often comes at the expense of results and service.

One of us had the opportunity to do a floor inspection of a car manufacturing plant in the then-Democratic Republic of East Germany. Outside the plant were hundreds of cars that would never drive. They had all met the specifications as stipulated by the government. The cars met the specification; they were audit compliant; they just did not work.

The look and feel of the plant was quite different from similar plants in West Germany. The ethos of the East German plant was to not get into trouble. Their audits were clean; it’s just that their cars weren’t any good.

Focus and follow-up

Since the prominence of State Capture, the focus in South Africa has been steadily away from efficiency and delivery. In part, it is the failure to acknowledge that there is a difference between getting, for example, only two quotes instead of three, versus colluding to defraud the state of millions for personal enrichment.

A colleague of ours recently completed a small but important piece of work for a state entity. The CEO acknowledged the quality of the work and the urgent need for a rapid follow-up. “If we could ask you to do the follow-up, that would take us forward both quickly and cost-effectively. However, I don’t think that my procurement officials will let me.”

In a corporate entity, a manager two levels down would have made that call, based on the need for delivery and the value for money. In the current toxic environment, there is little distinction between this and looting. The lack of distinction and the toxicity of the environment cause even the most senior managers to pause.

Ironically, however, not only is there little distinction; many of these tools were never intended to prevent looting and theft.

Take, for example, the requirement for three quotes. The three-quote system is used in corporates and governments around the world. It tests the market, promotes innovation and helps an astute manager align price and quality.

The one thing that a three-quote system does not do is stop corruption. We all know that it is possible to get three quotes and still inflate the price. In some cases, prices can be inflated by many multiples of a fair market price.

On the other hand, sometimes, multiple quotes are not efficient. Indeed, there are many Treasury notes from the Thabo Mbeki years aimed at promoting more nuanced management practice. Of course, in the Mbeki years, people talked about the developmental state, when it was believed that the state had a role in delivering services, and when it was believed that state organisations could go head to head with privately and publicly owned companies.

In the 1990s when the Mandela government took over, one of the executives in a state-owned entity told one of us that when an official says that something is not possible, there are three steps to take. First, ask for the chapter and verse: it probably doesn’t say what the official claims. Second, read the fine print, since, if it’s important, there may already be clauses that deal with the very exception. Thirdly, if it really reduces costs and enhances delivery, it is always permissible to write a motivation.

Before rolling blackouts became quite so widespread, one of us was doing a customer service audit in a small-town municipality. When power went off, officials streamed out of their offices. However, the little grocery store across the road kept functioning.

The grocery store had a generator and the generator kicked in. They delivered a service and they could not afford to lose business. They could not afford to pay their staff for unproductive hours.

It is interesting to contrast the two organisations. Although the municipality had a budget probably a thousand times that of the grocery store, they had not invested in business continuity. The store manager had motivated the expenditure which would have been accepted by the owners based on a business case and a positive return on investment.

The difference between the two organisations was the focus on delivery. For the municipality, the staff cost had been budgeted and was fixed. For them, the lack of electricity was a factor out of their control. For the grocery store however, a service needed to be delivered and a situation needed to be managed.

Bizarrely, even today we hear of magistrates’ courts which stop working during rolling blackouts. Faced with the same choice, a grocery store manager will do a return-on-investment analysis. She or he would rather invest than have up to half their annual staff and space budget go to waste.

Managers must manage. At the end of the year, they must account for what they have delivered. One of the most insidious effects of State Capture is that public sector managers feel exposed.

And because of that exposure, they are increasingly reluctant to take decisions that promote delivery and efficiency. DM

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